It's your funeral: but don't take cover

We bought our house more than six years ago from an elderly lady. It’s odd what you find out about the people you bought a property from – in London the former residents of our house left several bamboo canes in the main bedroom and we got some very dodgy adult-interest catalogues in the post. But the nice lady who owned our current house was obviously a sweetheart – and an easy touch given the number of requests from charities we get. Yes, I know you shouldn’t open post not addressed to you but I doubt she’d mind. Indeed I suspect she’s jolly relieved to get away from them.

One letter I’m pleased she didn’t receive came yesterday morning. Actually I opened it by mistake: it looked like a letter from my bank. This letter was not from a charity but was an offer for life insurance. It tells her that at her age, her ‘loved ones’ (their words, not mine) could get more than £2,000 when she dies in return for her paying £20 a month. I’m not going to name the company because frankly, its offer is no worse than any other of this type of life cover (it may well be better). My argument is with this kind of policy, not the company involved. Basically, this is funeral cover. It is sold to elderly people so they know there’s enough to pay for their passing. It’s a kind of whole of life cover, because unlike ordinary life insurance (which can be a good idea, and is very cheap if you are young when you take it out) it doesn’t have a predetermined end date: it pays out when you die, even if that is long after you took out the policy. And also, unlike term assurance, it does have a payout: term only pays out if you die while you are covered.

But the problem with this type of cover is that while the premiums might stay the same, the amount you’re covered for can be reviewed: so the longer you live, the less it can be. Or you might be offered an increase in premiums to keep the benefit amount the same. Whatever, it’s not a bargain: if you want to put money aside for your funeral, there are better places for it, I think: putting the £20-a-month in a savings account even if rates aren’t great would be better.

And if you want to see good reasons to take out life insurance see our quick guide here.